Thursday, October 6, 2016

Looking for Affordable Cash for Your Business? Kabbage Can Help

There was a time when a small business owner had to apply for a loan at a traditional institution like a bank and wait weeks to hear whether or not they’d been approved. Thanks to Kabbage, an alternative lender, that wait has been trimmed to minutes.

Kabbage, which started extending loans in 2011, now extends over $1 billion in small business financing a year. Their flexible lines of credit of up to $100,000 are paid back over 6 or 12 months.

And the entire process—from applying to receiving funds in either a PayPal or bank account—takes place online. No waiting in line at the bank or explaining the intricacies of your cash flow over the phone. Just click and type your way to a line of credit that can be drawn upon up to once per day.

Of course, there are terms and conditions to a Kabbage line of credit, as with any small business loan, and your business will have to meet certain requirements. Here in part one of our series on working with Kabbage, we’ll give you the rundown of their line of credit and walk you through the application process.

What’s a Kabbage Line of Credit & Why Do I Want One?

A line of credit from Kabbage works as an ongoing source of funding for small business owners who…

Don’t have time to go the traditional route

Need their lender to look at their business more holistically

Want the convenience of an online platform

You’ll select the amount they need from their line—which ranges between $2,000 and $100,000. This amount gets automatically deposited into your account to help satisfy any number of business needs, like making emergency repairs, investing in a new digital marketing campaign, or expanding your location.

Each withdrawal is considered a new loan with a 6 or 12 month payment schedule with simple, monthly fees. There’s no origination cost or fee for paying the loan back early, and new draws can be made as frequently as once per day.

Traditional Business Loan: Applying for one of these can take hours and often involves multi-page loan documents, income statements, tax returns, and other paperwork. It can take weeks to hear back and the money is delivered in one lump sum.

Business Credit Card: The application for a credit card usually relies heavily on a traditional FICO score, not a review of all business activity. It can take a week or more to receive a card in the mail and customers can only use it at places that accept credit—while cash, on the other hand, is accepted everywhere.

Merchant Cash Advances: The process of qualifying for an MCA usually involves filling out financial information online, then following up with financial documents, which can take a few days. The interest rates can be much higher than what you are offered with Kabbage, and repayment comes in the form of a percentage of daily credit card receipt volume rather than monthly payments.

Generally speaking, a Kabbage line of credit is easier to obtain, results in faster funding, and costs less than other options.

What Are The Requirements?

According to Kabbage, you need to be in business for a year and generate over $50,000 a year in revenue to be considered for a line of credit. There’s no minimum credit score or business size to consider.

Note that, like many lending institutions, Kabbage doesn’t extend credit to non-profits or to other lending companies.

What else does Kabbage care about?

Kabbage reviews lots of different variables when deciding whether to approve a business for a line of credit. According to Kabbage CEO Rob Frohwein, the company tends to assess three main factors: your capacity to repay, your character, and the stability of the business.

In order to judge these factors, Kabbage lets business owners link up their online financial services, including Intuit QuickBooks, business checking accounts, and Square. Kabbage determines financial performance by analyzing real-time metrics like average monthly revenue, seller rating and transaction volume.

Other “nontraditional” metrics are also used to determine the amount of cash that can be made available to you, such as an active and robust social media following. All of this information is plugged into Kabbage’s underwriting platform, which provides an automated decision within minutes.

How do I get started on an application?

Visit Kabbage.com and click the big “Apply Now” button. (Note: your credit score won’t be affected until you consent to a credit check later in the application process.) Then you’re on your way to completing the three-step business loan application process.

Step One:

The first page of the application asks basic information about you and your business, like your business name, business address and contact information, the company structure and industry type, the federal tax ID, and the establishment date. You’ll also create a Kabbage account on this page.

Step Two:

Securely link your financial services that Kabbage can use to review your revenue and other business transactions—such as a business checking account, transaction platforms like eBay or Amazon, and management services like QuickBooks or Xero.

You’ll log into those services to grant Kabbage access to business data. Kabbage reviews this information to determine your eligibility, but they can never see or store your login information.

Step Three:

The final step asks for more personal information, like name, address, phone number, date of birth, and the last four digits of your social security number.

You’re Done!

And—that’s it.

Kabbage will instantly review your information and let you know how much capital you can access based on what you provided. Continue linking additional financial services with the greatest revenue transactions to give Kabbage the fullest possible picture and potentially qualify for a higher line size and more favorable terms.

We’ll talk more about that in the second part of our series on working with Kabbage, which discusses how the company comes to a decision on your line of credit and how to get your cash.

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Kabbage is at the forefront of online lenders because of its quick application and review process. Since the application won’t hurt your credit score, consider giving it a shot.